Soaring crude adds fuel price hike buzz

TNN|

Jul 26, 2007, 02.49 AM IST

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NEW DELHI: The rising crude price may force the government to hike prices of diesel and petrol.

Petroleum minister Murli Deora has admitted the government is facing difficulty in keeping retail prices of petrol and diesel unchanged even as oil marketing companies (OMC) are making an under-recovery of Rs 195 crore everyday.

“The government is making every effort to check fuel price hike. At the same time, we are trying to find a solution to bail out OMCs,” Mr Deora said. It is indicated the petrol and diesel prices could be increased in worst case.Mr Deora said the government has kept retail prices unchanged but something must be done to save OMCs.

He, however, ruled out a price hike in immediate future. “We are trying hard to see the prices are not increased... I cannot say they will never be raised,” he said. He said the OMCs were bleeding. “I don’t know how long we can sustain this,” he added.

IOC, BPCL and HPCL are losing Rs 195 crore everyday by selling petrol, diesel, LPG and kerosene below the cost price, he added. The Indian basket of crude oil has averaged $72.31 per barrel this month.

Mr Deora said he held discussions with finance minister P Chidambaram on the issue. The ministry wants at least a third of the Rs 55,000-crore under-realisation on fuel sale this fiscal be met through issue of oil bonds. An equivalent amount is expected to be contributed by upstream firms like ONGC.

Mr Deora said the government could take other fiscal measures to contain fuel prices such as reducing excise duty and shifting from ad-valorem rates to fixed rates. He said no decision had been taken and consultations would continue in this direction. Mr Deora has briefed the Prime Minister on the situation and is in touch with Left parties’ leaders.